Developing and maintaining a detailed business plan is important when establishing and running your business.
It provides a solid framework that defines your objectives, requirements, estimated costs and overall business approach and philosophy. It is the very first step on translating a business idea into a business personality. But what is the real purpose of a business plan and how much detail do you really need?
A great business plan can be the springboard your business needs to jump from idea to reality. A poorly developed business plan can be a roadblock preventing your idea from ever becoming a reality. If you get stuck in analysis/paralysis you will likely exhaust your creative and planning energies on trying to document the plan itself. What you actually want to try and do is to use the development of your business plan to feed your energy through the development and documentation of ideas, not trying to overcome every business hurdle in the planning phase.
To build momentum, make your business planning exciting and motivating. Keep it short and sweet as a first pass, trust me, you will have plenty of time to develop the ideas and overcome the obstacles as you run your business. The key is to get it down on paper and get started!
My approach to developing a business plan is simple.
The first thing I do is be realistic about the type of business I am starting.
Many people who are starting their own enterprises will come from working in the private or public sector. Many large companies perform extensive and detailed business planning that is often performed years or even decades in the future. Unless you have a large capital reserve or are planning on acquiring a large company, it is likely that your business will start small. And with it, the planning process should be equally small. Be realistic, you are not starting the next IBM overnight in your basement. You do not need to spend all your time, effort and capital on creating a 1000 page business plan on how you will conquer the world.
The second thing I do is identify who my company is and what we stand for.
This should be an inspiring process. Write down what you value and pour your passion into the soul of your business. After all, your business should be a direct reflection of you. Please note, at this point, we are not identifying what our products are. We are simply saying who we are and what we stand for as a business.
The third thing I do is assess what I value and then perform a discovery process on what the market needs.
What products or services align with your values? What do you feel comfortable selling? What is the market screaming out for that you can offer in line with your values? Remember, aligning your products or services to what you value will help you in the future. When times are tough (and they most certainly will be), it will be your values and passion that will drive you forward. There will be times where all that you have left is what you value, you will probably need it to ensure you succeed past the hard times.
So you have identified potential products and services. Great!
The fourth thing you need to do after this is to assess your competitors.
Is there room for you in the market? Are you trying to play in a pool that is already full of other people swimming? Gain a high level understanding of the marketplace and be honest with yourself. If there is room for you to make your mark, great. If the market is too crowded, move on and continue searching.
Once you have a defined product or service, define your target market and demographics at a high level. This is who you should be interested with in building a community around your brand.
Ok, so you have a business concept and philosophy, a proposed product or service and an idea of who you want to sell it to. You have defined the “What”.
The second component of your business plan is the “How”.
This is where people can get stuck in analysis/paralysis. The idea in defining the how, is not to detail every single component of the how. It is only to identify the high level things you will need to do.
Points you should look to cover are:
– How will I market my business? Ie. Where will my leads come from and how will I generate them?
– How will I perform sales? Ie. Will all sales come to me to close? Will they be automated?
– How will I deliver my product or service? Ie. Will it be delivered electronically? Will I hold the stock myself or use drop-shipping etc?
– How will I administer my business? Ie. Who will perform the necessary administration functions (identifying this is important as it is a keystone function that is often neglected)
– How will I fund my business? Ie. Am I taking out a loan? Am I running this as a side business until it is sustainable? How much do I need to start? How much do I need each month to keep running?
– What do I need to start? Ie. What things need to be in place to begin? Remember, the goal here is not to get bogged down in planning details. List out the bare necessities of what you need to start and include it in your business plan.
To avoid getting stuck on any of the above points, keep your answers simple. And notice, I am not even talking about profitability yet. At the moment we are only understanding our costs to start and operate.
For example, here is a basic example for an ecommerce website run by a solopreneur.
How will I market my business?
I will market my business with an appealing e-commerce website. The site will utilise social media and well researched keywords for paid advertising. Leads can contact me through a contact form or prominently displayed phone number on the website. Leads can also decide to purchase without engagement of my company and move straight to the purchasing process (which is the preferred option).
How will I perform sales?
The sales process will be automated with the website shopping cart functionality managing all sales. For queries, leads can contact me using the contact form or prominently displayed phone number on the website.
How will I deliver my products?
Products will be delivered electronically. There will be a 7 day full refund policy.
How will I administer my business?
I will engage a Virtual Assistant to manage all end to end processes for my business. They will be responsible for the day to day operational management of the marketing, sales, fulfilment and customer service functions. I will manage the bookkeeping, strategic direction and funding requirements of the business. I estimate a monthly operating cost of $X to administer and operate the business which covers labour costs, business insurances and overheads.
What do I need to start?
To commence, I require the following:
· Completed ecommerce website – estimated cost $X
· Finalised product listing and descriptions – estimated cost $X
· Business registration and insurances – estimated cost $X
· Virtual Assistant hired – estimated cost $X
· Marketing budget – estimated cost $X
We are now at a point where, based on high level estimates, not only do we understand who our company is, what we are selling (and how) and who our competitors are, we also understand what it will cost us to start and how much we need to run each month (without factoring in sales). I do it this way because I like to see business costs without the optimistic lens of additional revenue through sales. I always ask myself the question, can I afford to run this business without any sales while we establish ourselves? If the answer is yes, then we are well set to establish a very firm foundation for the business.
The final component of the business plan is projected profitability. As articulated above, this is addressed separately to the business costs to ensure objectivity. To further increase objectivity, I use a variety of revenue scenarios based on the following inputs:
– Average profit margin per product ($)
– Number of sales per month (using a variety of different inputs, all of which should be realistic)
– Total business costs per month
Using this simple method, I identify the business break-even point. Basically, I like to know the number of sales per month I need to break even. I think to see a number of scenarios showing the monthly profit increasing based on increased sales. If the model appears sustainable, with the only true measure being “are the number of sales projected realistic?” I then can make a relatively informed decision on the viability of the business as a starting point.
This business plan above should fit on a single page. It should be a base document that you use to build your business. It should remain simple.
The key is then to START! Get your website built, your products defined, your team on-board. Using the initial business plan as a base, you can then use real operating data to scale your business accordingly. Measure the success of your paid advertising campaigns to understand the effectiveness of what you are doing. Drive your profitability through understanding your data as opposed to speculating how it might work while you are planning. Start simple and build your empire through practical application and real results.